Why Molycorp (MCP) Is Down Today

NEW YORK (TheStreet) -- Molycorp  (MCP) was falling 3.24% to $5.08 at 12:43 p.m. on Tuesday despite the mining company's fourth-quarter loss per share that narrowly beat analysts' expectations.

The company net loss narrowed to $194.3 million, or 95 cents a share, from $359.6 million, or $2.91 a share, in the same period one year earlier. The 2012 figure included a $258.3 million impairment charge. The adjusted loss per share, excluding items, was 28 cents, narrower than the 45 cents from the same period a year ago. Analysts expected a loss of 29 cents a share, according to Thomson Reuters I/B/E/S.

Revenue fell 8% to $123.8 million for the quarter, while analysts expected $150.63 million.

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TheStreet Ratings team rates MOLYCORP INC as a "sell" with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate MOLYCORP INC (MCP) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, generally high debt management risk and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Metals & Mining industry. The net income has significantly decreased by 270.2% when compared to the same quarter one year ago, falling from -$18.89 million to -$69.93 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Metals & Mining industry and the overall market, MOLYCORP INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$15.97 million or 192.89% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The debt-to-equity ratio of 1.06 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, MCP's quick ratio is somewhat strong at 1.30, demonstrating the ability to handle short-term liquidity needs.
  • The share price of MOLYCORP INC has not done very well: it is down 15.87% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • You can view the full analysis from the report here: MCP Ratings Report

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